LIPA worries feds may be rethinking funding for future storm mitigation projects

Uncertainty about the federal government’s willingness to fund future storm-mitigation work for public utilities across the country has caught the attention of LIPA’s financial team as it hurries to spend millions shoring up the grid using past FEMA grants.

LIPA as a public utility has been awarded more than $1 billion in storm-hardening mitigation money from the Federal Emergency Management Agency since 2011 following big storms such as Superstorm Sandy and Tropical Storm Isaias. But concern was heightened when FEMA in 2025 appeared to change its practice of awarding money to harden utility grids and other infrastructure to prevent future storm damage.

Mitigation funds are different from restoration funds, which FEMA routinely pays to help utilities cover the costs of restoring service directly after a storm. Mitigation funds pay for upgrades to lessen future risks and impacts and can help reduce future restoration costs FEMA pays.

FEMA has awarded more than $2.4 billion to LIPA over the years, including $1.2 billion to reimburse the utility for storm restorations and the mitigation initiatives, according to the utility. The latter included a $772 million mitigation grant following Superstorm Sandy to harden 338 overhead power lines and infrastructure, and $408 million following Isaias. LIPA also was awarded $10 million following the COVID-19 pandemic to replace 770 defective poles in low- to moderate-income communities. It has received $690 million of the $772 million Sandy grant to date, according to a footnote in a recent financial disclosure.

In a separate disclosure statement to investors last year, LIPA noted that the Trump administration in June "expressed a desire to reduce or eliminate FEMA following the 2025 hurricane season," and "immediately reduce funding to states." FEMA then convened a review council to consider changes to the agency. 

"Both the extent of potential FEMA changes and their impact on LIPA’s finances and operations, including expected grant funding, are unknown at this time," LIPA said in its disclosure. A spokesman didn't immediately respond to a request for comment Wednesday.

At a LIPA trustee meeting in January, officials indicated FEMA during 2025 had already made one notable change.

"Going forward in 2025 we saw that there we no mitigation grants awarded," said Kenneth Kane, LIPA’s senior vice president of investment planning. "That’s been very successful for us [in the past] and so I don’t know where that will end up going."

FEMA didn’t respond to Newsday questions about the mitigation program.

Kane told trustees work in progress from past FEMA awards was being accelerated.

"We’ve got the money obligated" for past mitigation awards, he said, and money has moved from FEMA to New York State coffers.

FEMA has said it plans to cut off funding for Superstorm Sandy mitigation awards starting this October, Kane said. LIPA in December filed for an extension on use of the funds, but FEMA replied that all extensions were "on hold until further notice."

As a result, Kane said he asked PSEG to accelerate a $53 million program to install up to 10,000 "trip savers" on the system, which help automatically detect and restore service on tripped lines. "We’ve asked them to accelerate that work so that we get that in before this October deadline."

LIPA's 2026 budget includes an anticipated $137.7 million in FEMA mitigation grants already awarded to continue storm-hardening work this year.

LIPA has a separate annual storm budget of just over $80 million to respond to the approximately 20 smaller storms it faces each year, but as a matter of practice it does not budget for big storms, officials said at the meeting. Money budgeted for storms that isn’t spent in a given year can be held in reserve for future storms. LIPA at the end of last year said it had $60 million in reserve for use on future storms, in addition to the budgeted $82 million for 2026.

LIPA has other mechanisms to cover for big-storm impacts. The delivery service adjustment on bills allows LIPA to recoup storm costs beyond the budget through a charge on monthly bills, costs that can be recovered over a three-year period.

LIPA has also got considerable amounts of cash, credit and equivalents on hand. According to February figures, LIPA had enough liquidity to fully fund operations for 317 days, well beyond the board mandated 150 days. In all, according to LIPA figures, there was $2.944 billion in cash, cash equivalents, investments and available credit as of Dec. 31, 2025, well above the $2.6 billion, or 287 days of liquidity, in the prior year. Of that $2.944 billion at its disposal, $871.5 million was unrestricted cash or cash equivalents, according to LIPA's recent disclosure.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.